Profitability of Small and Medium-Sized Enterprise in UK

Profitability of Small and Medium-sized enterprise in UK
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Table of Contents
INTRODUCTION AND BACKGROUND OF THE STUDY............................................................3
PURPOSE AND REASON OF THE PROJECT.................................................................................4
Aims and objectives..........................................................................................................................4
Rationale...........................................................................................................................................4
PRELIMINARY LITERATURE REVIEW.........................................................................................4
Theme: 1. Operations of small and medium sized operations..........................................................5
Theme: 2 Source of income generation for SMEs............................................................................5
Theme: 3. Growth indicators of SMEs.............................................................................................5
Theme: 4 Factors affecting SMEs profitability................................................................................6
SOURCES OF DATA...........................................................................................................................7
ANTICIPATED PROBLEMS..............................................................................................................7
EXPECTED TIME SCHEDULE.........................................................................................................8
RESEARCH METHODOLOGY.........................................................................................................8
Research approach............................................................................................................................8
Research philosophy.........................................................................................................................9
Research design................................................................................................................................9
Research type....................................................................................................................................9
Data analysis...................................................................................................................................10
Ethical consideration......................................................................................................................10
Validity and reliability....................................................................................................................10
REFERENCES...................................................................................................................................11
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INTRODUCTION AND BACKGROUND OF THE STUDY
According to European definition, all the enterprises that employ less than 250 employees, =
annual turnover up to the maximum limit of 50million Euro and total of balance sheet does not
exceed 43million Euro are called small and medium-sized enterprises (SME). With the change in
time, the role of SME in the economic growth and development is rapidly rising. They make an
effective contribution to the nation’s growth in terms of gross domestic product (GDP), more
employment opportunities and bringing innovations. With reference to United Kingdom (UK), in
the beginning of 2016, 5.5 million private sector enterprises operating as SMEs which has been
increased by 97000 from 2015 (UK small business statistics, 2016). Moreover, 99.9% of the private
entities are SMEs that is a clear sign of increasing role of SMEs in the country’s development. They
are also offering job opportunities to number of people, which in turn, reduces unemployment rate.
In 2016, SME provided employment to 15.7 million people that represent 60% of overall
employment in private sector (UK small business statistics, 2016).
The main aim of all the UK-based SMEs is to get larger return through their daily operations.
In order to maximize their net return, entrepreneurs are focusing their efforts to get larger revenue
and manage their cost effectively. Although UK statistical data clearly represent that number of
SMEs are growing rapidly, but still, SMEs are facing financial obstacles in getting sufficient
amount of funds to support their operations. Due to lack of required capital and funding difficulties
their profitability earning capacity are affected adversely. In order to encourage SMEs, UK
government also took number of initiatives to financially support the entities, but still, performance
is still not improved to the required extent. Along with this, SMEs who are able to get sufficient
capital are suffering difficulties due to lack of management skills and experience. Entrepreneurs
have no great knowledge of financial management and unable to utilize the funds and revenues in
efficient manner, which in turn, increases business cost and results in declining profitability.
However, in the present time of volatile external market conditions, only those entities can survive
who are operating successfully. Further, with the increasing number of SMEs, the level of
competition also has been enhanced. Therefore, it becomes essential for the entities to maximize
their net return, so that, they can compete effectively with the rivalries. Proposed investigation will
be conducted to examine the profitability of UK-established SMEs. Moreover, this research will
also determine various factors that impact firm profitability. Furthermore, it will also compare the
profitability of a small sized business with a medium sized organization of UK. In the end,
appropriate decisions will be recommended to enhance the net earnings of the firm, so that, it can
reach success in the market.
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PURPOSE AND REASON OF THE PROJECT
Aims and objectives
Research aim: “To examine and evaluate the profitability of small and medium sized enterprise in
UK”
Research objectives:
 To evaluate operations of small and medium sized enterprises.
 To determine various growth indicators of SMEs profitability.
 To examine numerous factors that impact profitability of small and medium sector enterprises.
 To compare profitability and growth of medium enterprises with that of small scale enterprises.
 To recommend appropriate ways to maximize SMEs net return in future period.
Rationale
Although many researches has been conducted earlier to evaluate the profitability of SMEs,
but still, none of the investigation has been done to examine the profit earning capacity of a small
sized enterprise. Moreover, in the historical years, none of the investigator compared the operational
performance of a small sized entity with that of medium sized entrepreneur. Therefore, this research
study helps to bridge both the gaps as in this study, researcher will analyse the net earnings of one
small sized entity and will also compare it with another medium sized business. Furthermore, this
investigation will also assist other scholars who will be willing to conduct the similar kind of study
in forthcoming period. Along with this, as already said earlier, that UK government also consider
the importance of SMEs in the nation progress and growth. They are taking necessary actions and
initiatives to encourage and promote SMEs. Thus, through this investigation, government and
regulatory bodies can determine the obstacles that SMEs are facing in their wider development.
With the help of this, they can formulate better policies and make decisions for encouraging SMEs.
Along with this, firms will be get benefited because they can determine numerous ways to
maximize their profit potential. This in turn, they can run their operations without any hazards,
enhance strategic and competitive strength and ensure long-run sustainability as well.
PRELIMINARY LITERATURE REVIEW
Literature review is regarded as the process of examining current knowledge and findings of
the different scholarly articles regarding to a particular topic. Before conducting any research,
scholar has to review, examine and evaluate theoretical as well as methodological framework in
relation to the field of study, called literature review.
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